Beekeeping Land Valuation Production vs Processing Manual for the - PowerPoint PPT Presentation

Beekeeping Land Valuation

Production vs Processing Manual for the Appraisal of Agricultural Land

The Important Concept • Ag appraisal is only on production of honey. • The appraisal process stops at the point honey is bottled. • Wholesale honey price is called Bulk Price. This is the value the appraiser should use. • Processed honey is anything that has been bottled. This is not to be used by the appraiser. • County Appraisal Districts mistakenly often use the price of wholesale bottled honey, a value that is far too high.

Production vs Profit 1-d-1 has no requirement for income or profit. Manual for the Appraisal of Agricultural Land

You want to be able to show production • It is your job to show that you are not a hobbyist • This can be shown a number of ways. Keeping a record of income and expenses, opening a checking account for your beekeeping, keeping a calendar of your operations of beekeeping or a schedule of hive checks and extraction … • Add to your credibility as a beekeeper by showing a calendar of your attendance at TBA Summer Clinics and other educational events

Standard Lease Rate • Agricultural land value is based on standard lease rates. It is calculated from operators income and expense only when standard lease rates are not available. • Yard rent for an apiary is usually 3 to 5 pounds of honey once or twice per year.

The Harris County Model • The Harris County model has been adopted by many counties in Texas. • In defense of Harris County, the appraisal of land used for beekeeping had to start with a calculation. I don’t believe that the work they have done is intentionally flawed. This is an honest effort to create a model for value. • But it is flawed.

Flawed Assumptions in the Harris Co. Model • There are 3 pieces of data that are used in the land value calculation: Average pounds of honey per hive per year, Wholesale price of honey in Texas, and Expenses per hive per year. • Wholesale price is clearly incorrect. Bulk price should be used. • Expenses per hive is almost certainly incorrect. • Pounds of honey per hive is area dependent and is probably incorrect for most of Texas.

This is where Harris Co gets it’s wholesale price and by definition it is NOT the price appraisal districts should use.

What is wholesale? • Appraisal districts should be using bulk prices. Honey in a jar “Case Price Per Pound” has been processed and by definition is not correct. The law requires the counties to use a price of honey before it is bottled.

How to find Bulk Honey Price The 5 year average used in 2016 would be appx. $1.93 per pound. http://usda.mannlib.cornell.edu/MannUsda/viewD ocumentInfo.do?documentID=1191

It is unlikely we extract 74 lbs per hive per year • In the US, small beekeepers extract a little more than half of what large scale beekeepers extract. While large beekeepers nationally extracted more than 58 pounds per hive last year, beekeepers with 5 hives or less extracted only 31.3 pounds per hive. The reason for this is probably easily understandable. Commercial beekeepers make money from pollination and move their hives to chase the honey flow. They have trucks and forklifts to move pallets of bees across the state or across the country. Small scale beekeepers can’t afford the equipment or have the economy of scale to move hives. Their hives will produce much less honey. The report is here: http://usda.mannlib.cornell.edu/usda/current/Hone/Hone-03-22- 2016.pdf. • Preliminary Texas Survey Results = 14.4# in ‘15 and 11.2# in ‘14

Our cost per hive per year is much higher than $60 How much does it cost to replace a working hive? A 4 frame nuc from Beeweaver is $290. That means a 44% loss is $127 per hive for last year. Add to that the labor and cost to check hives several times per year, the labor and cost to extract honey, the cost to treat Varroa mites and other pests, the cost of sugar and pollen substitute, normal depreciation of hive boxes and tools and any costs of replacing queens.

We operate at a loss • From an appraisal districts perspective, considering income and cost applicable ‘ to the land ’, most small beekeepers in Texas don’t make money. Our net operating income is negative. • Our beekeeping business may or may not make money, but that is not relevant to the appraisal district.

Beekeeping is Vital to Agriculture • Bees pollinate many fruits and vegetables, cotton and alfalfa used in animal feed stock. • Honey bees contribute over 15 Billion dollars to the US economy. • Honey bees are third in line behind beef and pork in their economic impact. • What you do as beekeepers is important.

Example • Mr. Harris and Ms. Kendall are both beekeepers. Each have 12 hives on 20 acres. • Mr. Harris’s property tax is calculated using 74 lbs per hive at $3.78 per pound. • Ms. Kendall’s property tax is calculated using 32 lbs per hive at $2.10 per pound. • Expenses per hive are both calculated at $60 per year. Beekeeper Harris Beekeeper Kendall Income per hive 74 lbs x $3.78 = $279.72 32 lbs x $2.10 = $67.20 Expenses per hive $60 $60 Net Operating Income $279.72 - $60 = $219.72 $67.20 - $60.00 = $7.20 Productivity Value per Hive $219.72 / .10 cap rate = $2197.20 $7.20 / .10 cap rate = $72 Average Hives per Acre 12 hives / 20 acres = .6 hives 12 hives / 20 acres = .6 hives Productivity Value per Acre $2197 x .6 = $1318 per acre $72 x .6 = $43.20 per acre

Please be a part of our Survey • We need as many of you to participate as possible. • The information you provide will help create a tax incentive for small beekeepers across Texas for many year. • As small beekeepers, you are the foreseeable future of beekeeping.